- EP35 How To Own The World: An Interview with Andrew Craig Part 2
Dr James:
Fans of the Dentist who Invest podcast. If you feel like there was one particular episode in the back catalog in the anthology of Dennis who Invest podcast episodes that really, really really was massively valuable to you, feel free to share that with a fellow dental colleague who’s in a similar position, so their understanding of finance can be elevated and they can hit the next level of financial success in their life. Also, as well as that, if you could take two seconds to rate and review this podcast, it would mean the world. To me, what that would mean is that it drives this podcast further in terms of reach so that more dentists across the world can be able to benefit from the knowledge contained therein. Welcome to the Dennis who Invest podcast. Welcome back to the second episode in this two-part series. With myself and Andrew Craig, we pick up where the conversation left off in the previous episode.
Andrew:
Now I’m slightly concerned. We haven’t talked about Bitcoin. Bitcoin is on the agenda.
Dr James:
Bitcoin is on the agenda, absolutely. We had a few things. We’ve talked about the philosophy a lot, but maybe now the next few things that I had planned was more about the actual nitty gritty and the meat and bones, meat and potatoes of investing, because there is a school of thought. Now I love your investment theories. I’ve read your book. I understand completely where you’re coming from. It’s about balancing capital appreciation with capital preservation. That’s, you’ve got your bonds. You’ve got your bonds for the preservation for when there’s a downturn, and your gold, and then you’ve got your stocks for the appreciation for when the good times are rolling. There is a school of thought that says, if you’re young enough and if capital appreciation isn’t something that you, let’s say, you want to take your profits within the next five years, then you are more at the whims of the stock market, because you’ll know more about the stock market than me. But it’s been shown over five years that you’ll always have more money than what you started with after five years. If you’re going into the stock market and you’ve got an over five years algorithm, investment strategy, investment plan, plan for taking your profits, plan for your retire, all of those things, then would it not be more. Because stocks have been proven to be the highest returning asset over any period of time, would it not be more sensible to have a 100% stocks portfolio and just take the hits on the ups and downs? What do you think?
Andrew:
I covered exactly this in my second book Live Unless Invest the Rest.
Dr James:
I see I wanted to ask you about your second book as well. We will dove into that.
Andrew:
Yes, I guess perhaps I should have run ranting about the environment and credit and I’ll have to focus more on this one. When you said what’s changed from the first book, there’s a very simple answer to what you just said and it’s a very well-known, classic approach to investment, which is a thing called 100 minus your age, basically what I’ve done. This book really. There’s a five email series on the opinion section of our website. If you search plain and just find it’s 100 minus your age, you’ll find the first one of five. Basically, this book is that five email series and a whole load of other stuff that emerged over the last few years. This has got really dull stuff like which stock, how to open an account with a stock broker and what is a nicer and this is much more nuts and bolts prescriptive. This actually goes hand-in-hand with our Facebook community and you get it for free. You get the digital version of your join, but 100 minus your age treats exactly the point you just made, which is basically if you’re 20, so 100 minus your age is an idea that’s been around since probably the 1940s and it’s pretty conventional in the States for financial advisors. They basically say, yeah, if you’re the younger you are, the more risky your investments can be, the more expertise they can be. The old approach from the 1940s, probably until about 10 years ago, was it’s basically 100 minus your age is what you own in equities. Or put another way you own your age in bonds. You’re 50% equities, 50% cash and bonds or bonds whatever. If you’re 70, you’d have 30% equity, 70% in cash and bonds. If you’re 30, it’s the other way around you’d have 70% in stock market and 30% in bonds. The rule of thumb is that you rebalance that every five years. You don’t have to mess about every year going on 64, whatever. You just do 50, 45, 40, etc. The problem with that idea in this day and age is that that worked far better when bond rates for 6 or 7 or 8 or 10%. There’s a 54-year chart of the US 10-year which is basically interest rates the biggest global bond market, which sets global interest rates-ish, I’m just trying to find it, but perhaps right, you can see that. Yes, basically that’s interest rates in the 80s with 15%. I used to make 11% in my post office account when I did my paper round when I was 12. Now they’re half a percent. The average is probably about 6% If you manage. There are two problems with that. Firstly, if you are 50 and you’ve got 50% equity, 50% bonds and cash in an area where the 50% that was in bonds was making 6 or 7 or 8 or even 10%, that’s still really contributing to your ability to grow your wealth, right. Yes, now that it’s half a percent or 1%, it’s really not To your point. You probably want to have a much higher allocation to equities, because there’s no use in making half a percent or 1%. It’s going to really take you far longer to make sensible amounts of money. Going back to my example of 5,000 becomes 945,000 at 10%. It’s no good. If you’re making 1%, the maths don’t work anywhere near the same. You end up with nothing. That’s called underperformance risk, which is a very real thing. That is why no one should ever own a cash iser. In my opinion. It’s just the most disastrous these days. You’re losing real wealth every year. I think it’s a scandal that we have financial journalists in this country who actually talk with a straight face about which cash ises. I mean it’s just ridiculous.
Dr James:
Yeah, because let’s not forget that when you put into a cash iser, it takes off your total likes for contributions, doesn’t it? It’s money you could otherwise be using. You’re 20 grand. Doesn’t that come out of your 20 grand, I think that’s right.
Andrew:
You can’t do more than 20. That’s right. Yeah, yeah, yeah yeah. But if you want to save cash, just save some cash for whatever a month’s worth or three months’ worth, or six months’ worth, whatever you feel comfortable with. But everything over and above that must be invested to beat inflation. There’s no point in having it sitting at something that is less than inflation. But anyway, the other problem is with this low interest rates. If you retired in 1995, when interest rates was 6% or whatever, 7%, and you’d managed to build a pot of a million quid, you’d be able to take a million quid and pay yourself 65, 70 grand a year of income off that pot, because interest rates are 6.5%, 7%. Now you’re lucky if you can pay yourself 10 grand. So you’ve got a million quid that you’ve managed to get to by doing all the things we recommend over a lifetime. Fantastic result, except, no, because the risk-free income that you can swap a million quid for now is 10 grand a year. Again, this is a story that people have always said. That is a disaster. So, anyway, the whole focus of this book is explaining okay, so rather than thinking about bonds and equities, what you need to do is think about aggressive versus defensive. So if you’re 50, you’d be 50% aggressive, 50% defensive and you need to start thinking a little bit more, a bit more nuanced and sophisticated way about what defensive could be. Aggressive is very easy, right? Aggressive could just be the S&P 500, you know, the MSCI world, the low world, openness, maybe a bit of Bitcoin for some of your aggressive Biotech small I mean, most of the biotech’s been going 14% per annum for the last 15 years. Smaller companies have done 15% per annum for 55 years, right, nobody knows this stuff. Now, the crucial importance is that they don’t do it every year reliably. They have massive volatility, so sometimes these things halve and what you’ve got to it’s very important to deal with, to treat volatility as you grow wealth, right. So, anyway, the investment fund we’ve launched is explicitly for the defensive bit and the idea is that you basically use backward-looking trend following and global multi-asset so that you’re in the S&P, you’re in the FTSE, you’re in gold, you’re in oil, you’re in whatever, and then, in a scenario like last year, you come out and go into cash just using a formulate, rules-based backward-looking trend following strategy so that, instead of where the S&P falls 55%, like it did in 070809, you’re out and in cash whilst that happens. Now you never sell at the top and you never buy at the bottom, because that’s the nature of it, but over evidence going back to 1872, it lifts returns and massively reduces that max downside. So that means that we hopefully think we have a defensive product with a max downside of sort of 5% or 10%, peak to trough worst negative year of about 6%, but that can capture 7.5% 8% over a business cycle, which means that defensive bit of your money can actually get you to these terminal values and pay you in retirement. So that’s a bit of, again, a bit of a long-winded answer. But yeah, the way to think about being more into equities is to use this idea of 100 monos per age and I totally agree. If you’re 30, there’s no reason you shouldn’t have 70% of your cash in more aggressive things in biotech and smaller companies and all of that stuff is covered in here. And if people don’t want to buy the book, we’ll join our group. It’s the five email series on the website and it’s all that. Content’s free, you know, it’s just accessible.
Dr James:
Cool, cool, yeah, because that was always. I’ve heard of the rule of 100 minus your age and the stocks and bonds thing, but now what you’re saying is that that’s slightly shifted in its thinking, in its narrative, and it’s more we should be thinking about the now, the idea that that proportion should be defensive rather than just aggressive.
Andrew:
Yeah, because in this, like in the 1960s or whatever, like if you were a retail investor, you could only buy bonds. You could only buy the Dow Jones or the US tenure. You could buy crypto and biotech and eat it. So now this is again. Another point I made in the first book is how much better financial services are now. You have some. You know I talk about 10 asset classes in my book. That’s eight more than just bonds and equities. So it’s a way of but it’s a way of thinking fundamentally about aggressive versus defensive, which one’s choose, keeping it really simple. You know, big, liquid, simple stuff. And the other thing to say quickly is, of course, the other you could perhaps use 120 minus your age instead of 100 minus your age, for a couple of other reasons. Life expectancy has gone up a lot, right. So if you’re going to 100 minus your age is in an area where average life expectancy is like 83 years old. Well, if you’re going to live to 110, that’s not what you’re not much used to, and similarly I did. I’ve joked about this in presentation of the other day one of my clients from the job that I just quit is 90 years old. Bless him, he’s an amazing guy. He’s what he was. He made partner at a stockbroking firm in the early 60s and he’s still going right and he can drink. I mean, the last time I went for lunch with him, he can drink more wine than you know, it’s just absolutely insane.
Dr James:
Top man, that’s impressive. I hope I’m like that when I’m 90. What was it? 90 hit? No, he’s 90. He’s 90. Oh, he’s 90.
Andrew:
Yeah Well, he was 88 last time I went for lunch with him, but I just suck at it. I don’t know how you do it, but you know the point being is that he’s still earning money at 88. He’s still earning a pretty decent crust, so he doesn’t need to. He didn’t retire at 65. You know he’s had 20 plus more years of earnings, so obviously that changes the equation. So he could be more risky than 100 minus your age, like he might use. Actually he might use 130 minus your age, which is crazy. But these are all, as I said, I cover all that in the second book and you know I like to think that it’s again whilst the last few minutes of this discussion. It probably seems a bit complicated and I’m speaking very fast. Actually, if you get down, you know what I’ve tried to do is paint the picture in a really simple first principles away. It’s like, okay, so you’re 40 years old, what’s percentage aggressive, what percentage defensive, and what simple things would you think about for each of those, and then kind of go la, la, la la and ignore all the you know the pick and mix stuff of this and that and sales people calling you, just go back to the most big, liquid, simple stuff like the S&P 500. Or, you know, you might buy a biotech, but that basically outlines the sort of top down way of thinking about and doing that.
Dr James:
We’ve mentioned Bitcoin a few times In your original book, you are, whilst you’re not necessarily negative about it, you are on the fence about it, shall we say, and you said that, whilst there could be massive upside, it also could be something that goes to zero. And I believe, I believe from memory that you said if someone was planning to get involved with the space, to allocate no more than 5% of their total invested capital to the space. How do you? Has your opinion shifted since then? Are you still on the fence? Are you? Are you even negative or bearish about?
Andrew:
it? I think so. To me it’s quite simple right. It’s a. It’s a highly volatile, speculative, unregulated asset right, which means that I think it’s as appropriate for somebody’s portfolio overall as a very risky share right. So I would probably never put more than between 2% and 5% of my money into a very risky share, like a single biotech company or an oil and gas company that’s out in Alaska trying to find oil and it’s you know it’s on the London stock market worth 100 million quid. One day it might be worth 2 billion quid and you make 20x your money. But you know, in the meantime it might also drill for oil and spend 100 million quid trying to get oil out the ground and find a doughnut and have zero and be worth nothing, right. So I? But the other thing about what? I guess, if my thoughts have moved on further, the other thing is I think it’s really, really important that you think big picture about what you’re trying to achieve financially right, and what you need, that. I don’t actually need Bitcoin. I don’t need something that is unregulated, incredibly volatile to achieve my own personal financial goals, and I think most people don’t. There are, you know, there are hundreds of thousands of companies. There are ETFs on the whole industries. There is gold. There’s such a paradise of opportunity to invest in right, all of which is regulated. You know there is actually somebody checking that it’s real and that lawyers have gone over it and prospectuses have been written and whatever else, rather than some Chinese whale wakes up in the morning or Elon Musk tweets and suddenly the market’s you know all of them 50%. I think Bitcoin could go to a million per Bitcoin, right, and it really could. It could be, but there’s incredible uncertainty over that. So what really pains me is what I see a lot which goes back to what we said at the top of the call is the number of people, especially people of a certain age, let’s say, under the age of 40 or even under the age of 50, frankly, what I see on social media who have never thought about an ICER, who don’t know what share is, who’ve never thought about, don’t know what the equity market is, they don’t know how to buy the S&P 500. They’ve never looked at the FTSE, they’ve never looked at how to invest in gold, they’ve not really thought about their pension, all this stuff that’s been around for too hundred years, right, the technology of investment that mankind has been using for 200 years and they’ve gone straight past all of that and they’re investing all their money and in some instances, borrowing on credit cards to invest all their money in crypto because of the whole thing about. Well you know, bitcoin goes to a million and I’ve seen people online talk about how they’re so excited that they’re going to be able to turn 500 pounds into enough to pay for the retirement of their kids going to private school in retirement and it’s like I saw the same thing in 0708,. I saw the same thing in 992,000, with 992,000 is the dot-com crash, when petfoodcom was valued at like $50 billion or was losing money on every can of pet food and shit. I think Bitcoin is an entirely Bitcoin and crypto and it’s a very interesting space intellectually blockchain, what it might do for the world Ether. For sure, bitcoin could go to a million, but I think that there’s real uncertainty about whether it will or not For me. I don’t want to deploy any capital in it because I don’t need to. I have very, very clear goals financially about what I need to get to in order to fund me and mine, look after my wife and kids and whatever else. I have real domain knowledge about a whole bunch of investments that I’ve been working with for 22 years. Why would I risk any of my capital in something which Elon Musk wakes up and tweets and it falls to his thumb? Even the risk reward is not attractive to me because I don’t need to achieve my financial goals and live a great life. I don’t need to buy something that might go up a thousand percent but might go to zero, and I don’t want to. Having said that, as I said to you, I’ve just quit my job and I need a lot of capital. I might not be able to pay myself anything for the next two, three years. I’m slightly more risk averse right now than I might otherwise be. If playing with finance succeeds greatly and we end up with 100 million in our fund and everything’s going really well, at some point I probably will allocate a bit of money to Bitcoin or Ether or whatever, just because it’s interesting and it’s speculative and maybe it goes up a lot, but there’s no way in hell that it would be like 50% or 80% or all of my investments, and it drives me nuts how many people are taking. I know you don’t take that approach, but they’re an awful lot of really, really evil people online, preying on people on Facebook saying you can’t lose and they think the most ridiculously so in the regulated arena you would go to prison for doing what they do, which is, they say, cryptocurrency Y has gone from this to this, which is up 10,000. If you’ve done this, you’d be a millionaire. That is totally illegal to do, whether if you’re broke in biotech or mining or normal equities and it drives me nuts that that’s not illegal. These people should go to prison because it’s so irresponsible. And any volatile asset. The other fallacious thing about that is, if you say, oh, bitcoin’s gone from $100 to $60,000, that does not mean that everybody who owns it has made that return, because a hell of a lot of them bought it for $19,000 in December 2017, when they got super excited and it was on the press every day, and then we’re down to $3,000. To the extent, the more volatile an asset class is, the more likely it is you’ll cock it up and, because human emotion has a really really strong part to play, and you’ll go oh, everybody’s buying, everybody’s selling. It’s just happened again in the last two weeks. Elon Musk wakes up one morning and tweets whatever. Then the Chinese do whatever, I don’t want to own something or expose my capital to something when there’s that risk, even if it might end up being worth a million dollars.
Dr James:
There’s nothing that you said that I would disagree with, nothing that you said that I would disagree with. I think that’s totally reasonable. And with investing that’s the interesting thing about it there’s no one shoe that fits and that comes into trading as well. There’s horses for courses, there’s different styles and people chase the gains in verticommas. But what works for you might not work for someone else. That’s the long and the short of it.
Andrew:
So know yourself. There’s a great book called although I forgot what it’s called but Dr Van Thaub, about trading.
Dr James:
Okay, van Thaub, trade your way to financial freedom here we go Over here, yeah.
Andrew:
And the first chapter. He says the most important factor in your success is you Like. You have to know yourself, you have to know your risk tolerance system. But, if I may, the other thing. The other point I wanted to make with apologies for interrupting you, though, because I think it’s really important is one of the great life lessons I think we should all learn and I’m still learning it at 45, is how you deploy your time is super, super important. Right, the 80-20 rule you get 80% of your results from 20% of your actions. So focus on the 20% of your actions. That actually matters right Now. One of the other problems to me with crypto is it’s incredibly time-consuming to do it well and to do it properly, and I don’t have the time right At my time. Every hour of my time that I spend working on playing with finance, doing a call like this, writing a piece, a thought piece about the SGT, whatever, is to me, a far better use of my time than an hour spent looking at screens trying to work out what Bitcoin or Ether might do next week. Truly and I think that’s very, very firmly true for somebody in their 20s who should frankly be working to become better at whatever their main job is, and the ROI on that activity will be far higher on a risk-adjusted basis than the ROI on messing about in crypto groups going. What’s it doing today? Is it up, Is it down? Hodl, what a waste of time. The counter-argument is if you’ve got 5% of your net worth, you have somebody who’s got a good handle on what is Cardano, what is Ether, what are the merits of these respects, and they’re like it’s a very good thing and says, okay, so own 10 of them and then just leave them for 20 years because that could really materially impact your net worth. Yeah, that is probably a sensible thing to do, but I’d rather do that with biotech names. I really would, because they might cure cancer. I’ve got a couple of companies I think are literally worth 100 times what they’re currently trading at. That I’m about to put in my pension, and that’s because they might cure cancer. I think that, to me, is a much more compelling investment thesis than really uncertain new categories classic cost, that’s unregulated and they can get winged around by Chinese people in Wanzhou. You know, because they’ve. I mean, you know anyway, I’m ranting and I’ll shut up and let you say your piece where the apology is.
Dr James:
Real quick guys. I’ve put together a special report for Dentist entitled the seven costly and potentially disastrous mistakes that dentists make whenever it comes to their finances. Most of the time, dentists are going through these issues and they don’t even necessarily realize that they’re happening until they have their eyes opened, and that is the purpose of this report. You can go ahead and receive your free report by heading on over to wwwdentistooninvestcom. Forward slash podcast report or, alternatively, you can download it using the link in the description. This report details these seven most common issues. However, most importantly, it also shows you how to fix them Really. Looking forward to hearing your thoughts. No, it’s great. No, I love to hear your opinion on it. And, like I say you haven’t, you haven’t said anything that I wouldn’t necessarily disagree with. When people get into the space, I don’t think they realize just how much time it takes to water the garden and plant the plants and maintain your portfolio, and whilst there are a lot of hacks to make yourself more time efficient doing that, there’s an absolute ton of those things that I learned through time that made me way more efficient. I would say you still have to keep an eye on it every day. As for actively trading it. For me personally, sometimes I go a whole weeks and I don’t move anything around and then sometimes there’s volatility, there’s a flurry of activity. What I do is I make it a lot more efficient by setting trade alerts on my phone and on trading viewing so I know if it hits certain prices. I don’t have to be in front of the computer. But absolutely that is not for everyone, and if someone is not prepared to do that, then my argument would be that you shouldn’t really be buying many of the altcoins, so many of the alternatives to Bitcoin and Ethereum, because really we talked about pump and dumps and manipulation a second earlier. 99% of those are pumps and dumps Okay, 99%. And, by the way, this is coming from someone who loves crypto. Okay, this is that. This is coming from someone who loves it. Yeah, 99% are pumps and dumps. However, one of the best ways to invest in crypto although maybe you might not agree with it on an ethical basis, is to be able to suss which of those charts and which of those cryptos are pumps and dumps by assessing the chart. Okay, and once you can do that, you can be on the right side of the smart money rather than the person who’s still buying Dogecoin or Shiba Inu at the prices that it currently is, because, come on, if you look at that, that is so clearly a pump and dump. You know what I mean. And there are people who bought that thing when it was really cheap and they’re selling to people like you so that they can make money. So absolutely anybody who is actively buying Dogecoin or Shiba Inu at these prices. I would encourage you to think twice about that. It is never something that I would buy the way it looks. At the minute we talk about market cycles, those are towards the end of their market cycle and as well as that, we mentioned something earlier. Maybe you I’m sure you’re aware of this. Well, you did. You did mention it. Actually, it is possible to passively invest in the crypto space, but there’s only, there’s only two cryptos that I would do that with, and you might even argue there’s. Maybe some would argue there’s three. Okay, those cryptos are Bitcoin and either and Binance coin, because as long as there’s Binance, there will probably be Binance coin. But the third one I’ve said, maybe not everybody would agree with that. Not even everybody would agree that Ethereum is a good long-term hold, but the majority of the consensus in in the space would say that Bitcoin is your only buy and hold, because whilst the space has value, bitcoin will have value. That’s the philosophy that a lot of people hold but I’ll make a comment about it.
Andrew:
So I was right. The car was a stockbroker with Swiss Bank in 99, 2000, when the dot-com boom was going on. Right, and Nokia. I believe that Nokia peaked at about 200 billion euros of market cap and it was that. It literally was 80% of the finished stock market. Right, everyone owned a Nokia phone. When you mentioned a Nokia phone, everyone owned a Nokia phone. Right, and everyone thought Nokia. Nokia is the big dog. You know, big dog, 800 pound, gorilla bell whether that is good has won the mobile phone battle. It’s worth 200 billion euros. It’s gonna be a trillion dollar company. They’re always crazy price on and the idea that Nokia as the most powerful, strong mobile phone incumbent globally would end up, I mean, I don’t know what it’s worth right now, but maybe it’s nothing.
Dr James:
Is it compared to?
Andrew:
it had a mobile infrastructure business and last summer looked at it was worth about four billion euros. So it was just making mobile towers for Apple and and Samsung to run there. You know, and I look, I’ve read a lot about Bitcoin. I’ve read a lot about the fact that you know the way it works. It’s so intractable the proof of concept of distribution that all that good stuff is why it is the big bell with a blue chip. That could you know. You have longevity and stuff. But I heard all the same arguments about Nokia that it was just unimpeachable, never gonna. Apple come it’s. It’s very rarely the first big dog that comes along in a new sector, whether that’s mobile phones in 98, 99 or crypto today that ends up 20 years later being still the one you know do you want to hear the spaces argument against that?
Dr James:
the spaces? The spaces argument would be that Bitcoin and Ethereum are effectively ETFs of the space. Okay, so it’s the equivalent of buying maybe the S&P 500 or the Fitzy or something like that, because it’s an index of all the cryptos. But again, you and I can say whatever, I can say all I like and you can say all I like. Basically no one knows. Okay, basically no one knows.
Andrew:
That is the point yeah, and look, I don’t know that, the biotech companies I mentioned earlier. I could kill cancer and go up on the next right, I mean or 10 or whatever but but I have a much better probability of getting that right as somebody’s to spend six and a half years working biotech than I do about getting crypto right now. Totally, and I think but to my extension, I think that most people, whether they’re 25, 30, 35, 40, whatever you are gainfully employed in a job that’s quite demanding and takes their time, I’ve got a better. If they deploy that their hours of time into that job and career progression, the likely ROI for them personally in their life is higher than deploying that time into learning about what, trying to figure out what Bitcoin and crypto and the ether will do. That’s my genuine view for most people. And the other thing is, particularly when I see, I see team, you know one of the ladies who works with us, a paying the funds, her son’s 13 and he and he asked if he could invest in Bitcoin the other day. He doesn’t know what an Icer is. Now that and now that is great to me. That is really worrying right, and that is that’s really prevalent right now. Is that kids on tiktok, you know millennials, people at uni, whatever the because the other thing is any speculative, incredibly volatile asset like if you’ve only got 5,000 quid of savings, there’s no way you should be anywhere near it. But you like wait until you’re 14, you’ve got 100,000. You know, I mean, and I know that, I know you were an early adopter and I know that a lot of people, you know there are lots of people in the crypto space who did gain and have made hundreds of times their money. So they maybe put five grand in another 200 grand or whatever, and that’s that’s great. But you know that 200 grand, I mean it may a mines worth well over a minute has over a million in PCC and ether and you know, two weeks ago now it’s 600 grand, what like and what happened, and fill us sort of psychologically. I would hate to have to think well, I’ve got them down 400 grand in the last three weeks. Now is it gonna go? Am I gonna be down another 400 grand in the month ahead or I’m gonna be back up for a round? I don’t know and I don’t want my wealth. I don’t want to have to sit there on a Sunday morning reading emails and looking at charts going geez, is it gonna do that? Is it gonna do that? I’ve got no interest that because I don’t need to. I really really don’t need to. It to what, ultimately? What is the point of all this investment stuff? Right it, as I said right at the beginning of the call, it is to get to a point in your life where you can live on your capital, not on your income. I mean then, if you like, to my point about my at 90 year old stock broker friend. Lots people don’t want to do is look. People who love their job might want to carry on earning income, but it’s only to just to use financial products to help you become wealthy and have an easier life and be able to afford things you like and look after your kids and depend on whatever else in that endeavor. There are loads and loads and loads and loads of really good quality regulated assets with which I can achieve that, and whereas I just think crypto is, you know it could go to zero. I mean, if I know it’s distributed and you can’t, but if you can’t distribute the person, if it is as illegal to go through the throw with a USB stick with CREPTON as it is to go through with three grams of cocaine in your pocket. That’s not going to be very good for the price of Bitcoin Right or any other. You know, if an American central bank’s the world over the three countries that have tried to replace the US dollar with gold in the last 20 years, do you know what they are?
Dr James:
No, I’d love to hear though.
Andrew:
Iraq, iran and Libya Okay, the three countries whose you know political leadership is mad enough to try and take on the American. You know what’s called the Pax dollar and basically American hedge around the dollar global currency system. If Americans are disproportionately wealthy because everybody used the dollar, it enables them to do stuff that nobody else can do and take more than their fair share of the world’s economic output. Right? What happens to those three countries? Because they say, well, screw you, america, we’re going to trade our world in a gold backed Deena. Now, how quickly did the tanks roll in, right?
Dr James:
Now Bitcoin that’s crazy. I didn’t know that. I had no idea.
Andrew:
I don’t think a lot when most crypto users don’t, with our audience being asked about it. Right, you know I get. There are plenty of counter-economics to what I’m saying. It’s really interesting, you know, it’s a wonderful technology. Like to get rid of an intermediary and have proof embedded into the, into the blockchain, all that good stuff. But and it’s distributing stuff, but the end of the day, if it starts to threaten America’s ability to protect power globally. Now there’s a great I forget the name. There’s a really good Bitcoin commentator. It’s like a Turkish name, he’s a British guy. He’s based in America. He’s quite prolific. No doubt It’ll come up Ron Paul, somebody Paul or not Ron Paul, but anyway it might come back to me. He made a really good point, which is to counter-argument my argument. So, okay, fine, but Bitcoin could easily be half a million dollars before it’s banned. And actually in the last two years he’s been right, you know, it’s come from 3000 to 60,000. So you know my argument, my argument that maybe one day America wakes up and makes it illegal to carry to use crypto, all in pain of seven years in prison. Right, and so did the EU, and so did China, and so did Japan. And then, well, what happens then. That argument has been valid for several years and in that time the price has gone from $3,000 to $60,000 and obviously now back down to 37,000 or whatever it is, but that’s a very, very dangerous game of Russian roulette to me with my hard-earned capital Like. Anyway, the overall conclusions go back to your original question is I would certainly consider it for a small amount of my net worth at some point when my net worth is bigger, you know, and my net worth at the moment, the speculative, aggressive bit of my net worth at the moment, is all going to be going into biotech. Because I know these companies inside out. I think I have a pretty good handle on that space. I think companies that are going to cure cancer or dementia or have robots replace nurses in elderly patient care, and there’s so much incredible stuff happening in biotech. I think that is fundamentally more valuable than an untested, untried new type of investment that the government sort of well might make illegal in the previous time.
Dr James:
Yeah, I won’t disagree with anything that you said. I won’t. I think we can both agree, andrew, that perhaps the number of people who get into crypto don’t fully realise what they’re getting into and maybe it would be helpful if they had more of an understanding of what that entails and also a better understanding of their circumstances, conventional financial instruments and how that reflects in their investing not only generally but also in the crypto space. Does that sound reasonable?
Andrew:
That is absolutely, and you know, and there are good guys. I mean, the trouble is in an unregulated space where anybody can say anything they want, there are lots of bad actors, right, and it’s hard to disagree with the good actors, but you know that’s your battle to fight and I wish you the very best. One other thing I wanted to say, though, before we move off the topic, because I ranted about it and I didn’t mean to come across this, but you know it is fascinating. The other thing I was going to say to you is some of the very smartest and most successful people I know, including my best man you know who was my best man, one of my wife when I got married who has a very, very high profile job and is a super big marketer, you know, are huge bulls of crypto. I think they think I’m an idiot and then, frankly, they are smarter than me and it was like but it comes back to the opportunity cost argument for me personally, it’s like, you know, for me personally, I have very clear plan about what I want to achieve and what I need and what I can use, which vehicles I can use. To that. I don’t need crypto, but you know, I just want to say that some of my very smartest friends have really junk the Kool-Aid and see the vision and think it’s going to be totally transformational for the world and all that stuff. So you know I’m probably full of nonsense.
Dr James:
But that’s the part I love about investing is there is no one shoe that fits. And to pull you back to Van Tharp’s book as well we were just talking about it. There’s a lot of things. If anybody is trading and hasn’t read that book, please read that book. I’m going to hold it up to the screen now For anybody who’s listening to the audio version of this. It’s called Trade your Way to Financial Freedom and by a man called Kevan Tharp, and I quoted a lot. I quoted a lot in my trading. It’s not the only trading book I’ve ever read, but it’s definitely probably the best.
Andrew:
It’s one of the real, it’s like one of the foundational texts of you know, if you want to spend time on trading, you definitely need to read that book.
Dr James:
It’s seminal, honestly, and the way the guy the guy makes so many interesting points in it. He makes the point that trading is 100% psychology. Okay, because if you don’t have your psychology down, it doesn’t matter what system you use, you’ll never be able to trade it effectively. And it’s other point that he makes that really sticks with me is that there is no, there is no holy grail in investing. This is the exact quote there is no holy grail in investing. There is just your holy grail and you need to find what that is. I love that.
Andrew:
By the way, have you read Way of the Turtle as well?
Dr James:
I haven’t, but it’s on my to read list. I recently read well, not so recently, maybe about four or five months ago psychology of money.
Andrew:
Yeah, so I was on a call with him three Wednesday. Morgan Housel yeah, so I. It was this Irish. I was doing an interview for a big Irish investment thing and the two guest speakers were me and Morgan Housel and I was like bloody hell, yeah, he sold. I think that book sold 300,000 copies. Now, In fact, at two o’clock this afternoon, I’ve got a call with his publisher Exciting Wow To talk about my next book. So with that, with the same publishing house, don’t tell my current publisher that yes.
Dr James:
I don’t think anyone will listen to this podcast, so we should be okay.
Andrew:
I’m a shopping but it’s an exploratory school. But no, that I have also. That is. You’re exactly right, it’s that point about how important you are and your, you know your, your ideas about money. But I mean, then again, that is a malleable thing, like one of the one of the biggest problems is people have all these totally incorrect beliefs about money. The stock market is a casino. Wrong. Cash is king. Wrong. Property can only ever go up and paying some paying rent, it’s paying somebody else’s mortgage, wrong. I mean like if you have grown up with all these beliefs that are just totally simplistic, that you know parents pass on to their kids and their parents are not financially literate like they do this, do that, and they’re just fundamentally unhelpful, wrong things, then one of the most important things to do in order to succeed in investment is to change those incorrect things by educating yourself. And you know I flatten myself saying hopefully my book doesn’t element that.
Dr James:
Educate yourself, everyone. The books are out there, the knowledge is out there. If anybody needs some recommendations on books, you know where I am on Facebook, andrew. We’re coming towards the end of this podcast and I wanted to ask if there’s. There will naturally be some people listening to this who have yet to begin their investment journey. Do you have any words of encouragement that you’d like to offer them to begin?
Andrew:
Absolutely, I think, the most important thing. So we needed to early like my idea of ignoring the news. Every week, almost without fail, I’ll get at least one email from somebody saying I’ve read your book. I really loved your book. Thanks so much for it. I’ve been thinking about investing and my wife and I just wanted to get in touch because we’re wondering whether or not now is the right time to start investing. Because of Brexit, trump, syria, libya, coronavirus, boris Johnson, there’s always a reason to be scared of investment and to not invest. My answer to them and I’ve written this up in some of my opinion pieces the right time to invest is always now, every month, for the rest of your life, as long as you’ve learned enough about how to do that in a sensible way. What are the main things? Waiting until some time when there won’t be Brexit or there won’t be coronavirus or there won’t be? There is never a time like that because, as I said earlier, the press spend 99% of their life, of their time focusing on the 0.001% of bad things that are happening in the world. We all have this completely fear-based, incorrect understanding of investment. My enemy. Starting out their investment journey should sort out an ISA should pay at least 10% of whatever they can save, whatever they earn each month, into a sensible mix of investments. I’d like to think that that’s the theory and that’s the practice. Just to repeat, if I may do a bit of a plug.
Dr James:
I actually wanted to ask you about your new book. I can see you holding up to the screen For anybody who’s listening. Would you be able to tell us the title and a little bit more about?
Andrew:
it. It’s called Live Unless Invest. The Rest we call it a workbook. I actually had to pay a lawyer a lot of money to sign off on that book before we published it, because it’s quite prescriptive and it talks about our funds, for example. You’ve got to be very careful about what you can and can’t say. You have an investment fund and it all has to be disclaimed. Hopefully, I think anybody who reads it will see that it’s quite fair about the merits of our fund. In fact, it’s only appropriate for certain amounts of your money and certain people and stuff. Basically, it’s that 100-year-old age idea. It’s really the nuts and bolts of how to implement a sensible, big picture, long-term approach to investment. It’s investing, it’s not trading. I want to say our Facebook group is a fiver a month. You can join through our website and everybody who joins the Facebook group gets that for free in audio, in audiobook and ebook versions. You can join the thing, pay a fiver, get it for free and then leave if you want to, if you don’t like it, or it’s available on Amazon along with the other ones. I find it myself to think that if you get through both of the books, you should be like 80% to 90% of the way to being able to confidently or maybe even more being able to, sap an ICER and think about your pension and just get stuff stored in a really prudent, long-run, boring tortous approach to investment.
Dr James:
Thank you so much, andrew. Thanks as well for being so generous with your time, because we’ve been on this call about two and a half hours. What I was going to propose, I was going to propose that we split this into two podcasts, actually, because I think two hours is asking quite a lot of anybody to sit through our rambling. That might be quite nice. What I will do everyone. You’ll be listening to the second part of the podcast. This will be the conclusion that you’re listening to now, because this will, of course, be the second bit. Andrew has been very generous with his time today. I’m so grateful that he’s managed to squeeze us into his day, because I’m sure he’s an incredibly busy person. What was your fund? What was replying to people on Facebook? All of those things. Thank you so so much, andrew. If anybody who is listening to this is not on my Facebook group the Facebook group that spawned this podcast feel free to search it on Facebook. It’s for dentists who are wanting to raise their financial literacy and gain a practical knowledge about how they might invest sensibly emphasis on sensibly so that they can build a long-term money pot and retire and live financial freedom and all of those things that we’ve taught that we’re conventionally told that may be out of our reach. They’re totally within our reach and that is possible to do. You just need to write and honestly do it. The Facebook group’s name is Dentist who Invest Community Group for Dentist who Enjoy Trading, and I look forward to seeing you on there if you find this podcast of interest today, andrew, thank you so much once again and thank you for coming on the show.
Andrew:
You’ve really enjoyed it. Speak to you soon.
Dr James:
If you enjoyed this podcast, please hit, follow or subscribe so you can stay up to date with information on new podcasts which are released weekly. Please also feel free to leave a positive review so others can learn about this podcast and benefit from it. I would also encourage any fans of the podcast to sign up to the free Facebook community from which the podcast originated. Please search Dentist who Invest on Facebook and hit join to become part of a community of thousands of other dentists interested in improving their finances, wellbeing and investing knowledge. Looking forward to seeing you on there.
Dr James:
Fans of the Dennis who Invest podcast. If you feel like there was one particular episode in the back catalog in the anthology of Dennis who Invest podcast episodes that really, really really was massively valuable to you, feel free to share that with a fellow dental colleague who’s in a similar position, so their understanding of finance can be elevated and they can hit the next level of financial success in their life. Also, as well as that, if you could take two seconds to rate and review this podcast, it would mean the world. To me, what that would mean is that it drives this podcast further in terms of reach so that more dentists across the world can be able to benefit from the knowledge contained therein. Welcome to the Dennis who Invest podcast. Welcome back to the second episode in this two-part series. With myself and Andrew Craig, we pick up where the conversation left off in the previous episode.
Andrew:
Now I’m slightly concerned. We haven’t talked about Bitcoin. Bitcoin is on the agenda.
Dr James:
Bitcoin is on the agenda, absolutely. We had a few things. We’ve talked about the philosophy a lot, but maybe now the next few things that I had planned was more about the actual nitty gritty and the meat and bones, meat and potatoes of investing, because there is a school of thought. Now I love your investment theories. I’ve read your book. I understand completely where you’re coming from. It’s about balancing capital appreciation with capital preservation. That’s, you’ve got your bonds. You’ve got your bonds for the preservation for when there’s a downturn, and your gold, and then you’ve got your stocks for the appreciation for when the good times are rolling. There is a school of thought that says, if you’re young enough and if capital appreciation isn’t something that you, let’s say, you want to take your profits within the next five years, then you are more at the whims of the stock market, because you’ll know more about the stock market than me. But it’s been shown over five years that you’ll always have more money than what you started with after five years. If you’re going into the stock market and you’ve got an over five years algorithm, investment strategy, investment plan, plan for taking your profits, plan for your retire, all of those things, then would it not be more. Because stocks have been proven to be the highest returning asset over any period of time, would it not be more sensible to have a 100% stocks portfolio and just take the hits on the ups and downs? What do you think?
Andrew:
I covered exactly this in my second book Live Unless Invest the Rest.
Dr James:
I see I wanted to ask you about your second book as well. We will dove into that.
Andrew:
Yes, I guess perhaps I should have run ranting about the environment and credit and I’ll have to focus more on this one. When you said what’s changed from the first book, there’s a very simple answer to what you just said and it’s a very well-known, classic approach to investment, which is a thing called 100 minus your age, basically what I’ve done. This book really. There’s a five email series on the opinion section of our website. If you search plain and just find it’s 100 minus your age, you’ll find the first one of five. Basically, this book is that five email series and a whole load of other stuff that emerged over the last few years. This has got really dull stuff like which stock, how to open an account with a stock broker and what is a nicer and this is much more nuts and bolts prescriptive. This actually goes hand-in-hand with our Facebook community and you get it for free. You get the digital version of your join, but 100 minus your age treats exactly the point you just made, which is basically if you’re 20, so 100 minus your age is an idea that’s been around since probably the 1940s and it’s pretty conventional in the States for financial advisors. They basically say, yeah, if you’re the younger you are, the more risky your investments can be, the more expertise they can be. The old approach from the 1940s, probably until about 10 years ago, was it’s basically 100 minus your age is what you own in equities. Or put another way you own your age in bonds. You’re 50% equities, 50% cash and bonds or bonds whatever. If you’re 70, you’d have 30% equity, 70% in cash and bonds. If you’re 30, it’s the other way around you’d have 70% in stock market and 30% in bonds. The rule of thumb is that you rebalance that every five years. You don’t have to mess about every year going on 64, whatever. You just do 50, 45, 40, etc. The problem with that idea in this day and age is that that worked far better when bond rates for 6 or 7 or 8 or 10%. There’s a 54-year chart of the US 10-year which is basically interest rates the biggest global bond market, which sets global interest rates-ish, I’m just trying to find it, but perhaps right, you can see that. Yes, basically that’s interest rates in the 80s with 15%. I used to make 11% in my post office account when I did my paper round when I was 12. Now they’re half a percent. The average is probably about 6% If you manage. There are two problems with that. Firstly, if you are 50 and you’ve got 50% equity, 50% bonds and cash in an area where the 50% that was in bonds was making 6 or 7 or 8 or even 10%, that’s still really contributing to your ability to grow your wealth, right. Yes, now that it’s half a percent or 1%, it’s really not To your point. You probably want to have a much higher allocation to equities, because there’s no use in making half a percent or 1%. It’s going to really take you far longer to make sensible amounts of money. Going back to my example of 5,000 becomes 945,000 at 10%. It’s no good. If you’re making 1%, the maths don’t work anywhere near the same. You end up with nothing. That’s called underperformance risk, which is a very real thing. That is why no one should ever own a cash iser. In my opinion. It’s just the most disastrous these days. You’re losing real wealth every year. I think it’s a scandal that we have financial journalists in this country who actually talk with a straight face about which cash ises. I mean it’s just ridiculous.
Dr James:
Yeah, because let’s not forget that when you put into a cash iser, it takes off your total likes for contributions, doesn’t it? It’s money you could otherwise be using. You’re 20 grand. Doesn’t that come out of your 20 grand, I think that’s right.
Andrew:
You can’t do more than 20. That’s right. Yeah, yeah, yeah yeah. But if you want to save cash, just save some cash for whatever a month’s worth or three months’ worth, or six months’ worth, whatever you feel comfortable with. But everything over and above that must be invested to beat inflation. There’s no point in having it sitting at something that is less than inflation. But anyway, the other problem is with this low interest rates. If you retired in 1995, when interest rates was 6% or whatever, 7%, and you’d managed to build a pot of a million quid, you’d be able to take a million quid and pay yourself 65, 70 grand a year of income off that pot, because interest rates are 6.5%, 7%. Now you’re lucky if you can pay yourself 10 grand. So you’ve got a million quid that you’ve managed to get to by doing all the things we recommend over a lifetime. Fantastic result, except, no, because the risk-free income that you can swap a million quid for now is 10 grand a year. Again, this is a story that people have always said. That is a disaster. So, anyway, the whole focus of this book is explaining okay, so rather than thinking about bonds and equities, what you need to do is think about aggressive versus defensive. So if you’re 50, you’d be 50% aggressive, 50% defensive and you need to start thinking a little bit more, a bit more nuanced and sophisticated way about what defensive could be. Aggressive is very easy, right? Aggressive could just be the S&P 500, you know, the MSCI world, the low world, openness, maybe a bit of Bitcoin for some of your aggressive Biotech small I mean, most of the biotech’s been going 14% per annum for the last 15 years. Smaller companies have done 15% per annum for 55 years, right, nobody knows this stuff. Now, the crucial importance is that they don’t do it every year reliably. They have massive volatility, so sometimes these things halve and what you’ve got to it’s very important to deal with, to treat volatility as you grow wealth, right. So, anyway, the investment fund we’ve launched is explicitly for the defensive bit and the idea is that you basically use backward-looking trend following and global multi-asset so that you’re in the S&P, you’re in the FTSE, you’re in gold, you’re in oil, you’re in whatever, and then, in a scenario like last year, you come out and go into cash just using a formulate, rules-based backward-looking trend following strategy so that, instead of where the S&P falls 55%, like it did in 070809, you’re out and in cash whilst that happens. Now you never sell at the top and you never buy at the bottom, because that’s the nature of it, but over evidence going back to 1872, it lifts returns and massively reduces that max downside. So that means that we hopefully think we have a defensive product with a max downside of sort of 5% or 10%, peak to trough worst negative year of about 6%, but that can capture 7.5% 8% over a business cycle, which means that defensive bit of your money can actually get you to these terminal values and pay you in retirement. So that’s a bit of, again, a bit of a long-winded answer. But yeah, the way to think about being more into equities is to use this idea of 100 monos per age and I totally agree. If you’re 30, there’s no reason you shouldn’t have 70% of your cash in more aggressive things in biotech and smaller companies and all of that stuff is covered in here. And if people don’t want to buy the book, we’ll join our group. It’s the five email series on the website and it’s all that. Content’s free, you know, it’s just accessible.
Dr James:
Cool, cool, yeah, because that was always. I’ve heard of the rule of 100 minus your age and the stocks and bonds thing, but now what you’re saying is that that’s slightly shifted in its thinking, in its narrative, and it’s more we should be thinking about the now, the idea that that proportion should be defensive rather than just aggressive.
Andrew:
Yeah, because in this, like in the 1960s or whatever, like if you were a retail investor, you could only buy bonds. You could only buy the Dow Jones or the US tenure. You could buy crypto and biotech and eat it. So now this is again. Another point I made in the first book is how much better financial services are now. You have some. You know I talk about 10 asset classes in my book. That’s eight more than just bonds and equities. So it’s a way of but it’s a way of thinking fundamentally about aggressive versus defensive, which one’s choose, keeping it really simple. You know, big, liquid, simple stuff. And the other thing to say quickly is, of course, the other you could perhaps use 120 minus your age instead of 100 minus your age, for a couple of other reasons. Life expectancy has gone up a lot, right. So if you’re going to 100 minus your age is in an area where average life expectancy is like 83 years old. Well, if you’re going to live to 110, that’s not what you’re not much used to, and similarly I did. I’ve joked about this in presentation of the other day one of my clients from the job that I just quit is 90 years old. Bless him, he’s an amazing guy. He’s what he was. He made partner at a stockbroking firm in the early 60s and he’s still going right and he can drink. I mean, the last time I went for lunch with him, he can drink more wine than you know, it’s just absolutely insane.
Dr James:
Top man, that’s impressive. I hope I’m like that when I’m 90. What was it? 90 hit? No, he’s 90. He’s 90. Oh, he’s 90.
Andrew:
Yeah Well, he was 88 last time I went for lunch with him, but I just suck at it. I don’t know how you do it, but you know the point being is that he’s still earning money at 88. He’s still earning a pretty decent crust, so he doesn’t need to. He didn’t retire at 65. You know he’s had 20 plus more years of earnings, so obviously that changes the equation. So he could be more risky than 100 minus your age, like he might use. Actually he might use 130 minus your age, which is crazy. But these are all, as I said, I cover all that in the second book and you know I like to think that it’s again whilst the last few minutes of this discussion. It probably seems a bit complicated and I’m speaking very fast. Actually, if you get down, you know what I’ve tried to do is paint the picture in a really simple first principles away. It’s like, okay, so you’re 40 years old, what’s percentage aggressive, what percentage defensive, and what simple things would you think about for each of those, and then kind of go la, la, la la and ignore all the you know the pick and mix stuff of this and that and sales people calling you, just go back to the most big, liquid, simple stuff like the S&P 500. Or, you know, you might buy a biotech, but that basically outlines the sort of top down way of thinking about and doing that.
Dr James:
We’ve mentioned Bitcoin a few times In your original book, you are, whilst you’re not necessarily negative about it, you are on the fence about it, shall we say, and you said that, whilst there could be massive upside, it also could be something that goes to zero. And I believe, I believe from memory that you said if someone was planning to get involved with the space, to allocate no more than 5% of their total invested capital to the space. How do you? Has your opinion shifted since then? Are you still on the fence? Are you? Are you even negative or bearish about?
Andrew:
it? I think so. To me it’s quite simple right. It’s a. It’s a highly volatile, speculative, unregulated asset right, which means that I think it’s as appropriate for somebody’s portfolio overall as a very risky share right. So I would probably never put more than between 2% and 5% of my money into a very risky share, like a single biotech company or an oil and gas company that’s out in Alaska trying to find oil and it’s you know it’s on the London stock market worth 100 million quid. One day it might be worth 2 billion quid and you make 20x your money. But you know, in the meantime it might also drill for oil and spend 100 million quid trying to get oil out the ground and find a doughnut and have zero and be worth nothing, right. So I? But the other thing about what? I guess, if my thoughts have moved on further, the other thing is I think it’s really, really important that you think big picture about what you’re trying to achieve financially right, and what you need, that. I don’t actually need Bitcoin. I don’t need something that is unregulated, incredibly volatile to achieve my own personal financial goals, and I think most people don’t. There are, you know, there are hundreds of thousands of companies. There are ETFs on the whole industries. There is gold. There’s such a paradise of opportunity to invest in right, all of which is regulated. You know there is actually somebody checking that it’s real and that lawyers have gone over it and prospectuses have been written and whatever else, rather than some Chinese whale wakes up in the morning or Elon Musk tweets and suddenly the market’s you know all of them 50%. I think Bitcoin could go to a million per Bitcoin, right, and it really could. It could be, but there’s incredible uncertainty over that. So what really pains me is what I see a lot which goes back to what we said at the top of the call is the number of people, especially people of a certain age, let’s say, under the age of 40 or even under the age of 50, frankly, what I see on social media who have never thought about an ICER, who don’t know what share is, who’ve never thought about, don’t know what the equity market is, they don’t know how to buy the S&P 500. They’ve never looked at the FTSE, they’ve never looked at how to invest in gold, they’ve not really thought about their pension, all this stuff that’s been around for too hundred years, right, the technology of investment that mankind has been using for 200 years and they’ve gone straight past all of that and they’re investing all their money and in some instances, borrowing on credit cards to invest all their money in crypto because of the whole thing about. Well you know, bitcoin goes to a million and I’ve seen people online talk about how they’re so excited that they’re going to be able to turn 500 pounds into enough to pay for the retirement of their kids going to private school in retirement and it’s like I saw the same thing in 0708,. I saw the same thing in 992,000, with 992,000 is the dot-com crash, when petfoodcom was valued at like $50 billion or was losing money on every can of pet food and shit. I think Bitcoin is an entirely Bitcoin and crypto and it’s a very interesting space intellectually blockchain, what it might do for the world Ether. For sure, bitcoin could go to a million, but I think that there’s real uncertainty about whether it will or not For me. I don’t want to deploy any capital in it because I don’t need to. I have very, very clear goals financially about what I need to get to in order to fund me and mine, look after my wife and kids and whatever else. I have real domain knowledge about a whole bunch of investments that I’ve been working with for 22 years. Why would I risk any of my capital in something which Elon Musk wakes up and tweets and it falls to his thumb? Even the risk reward is not attractive to me because I don’t need to achieve my financial goals and live a great life. I don’t need to buy something that might go up a thousand percent but might go to zero, and I don’t want to. Having said that, as I said to you, I’ve just quit my job and I need a lot of capital. I might not be able to pay myself anything for the next two, three years. I’m slightly more risk averse right now than I might otherwise be. If playing with finance succeeds greatly and we end up with 100 million in our fund and everything’s going really well, at some point I probably will allocate a bit of money to Bitcoin or Ether or whatever, just because it’s interesting and it’s speculative and maybe it goes up a lot, but there’s no way in hell that it would be like 50% or 80% or all of my investments, and it drives me nuts how many people are taking. I know you don’t take that approach, but they’re an awful lot of really, really evil people online, preying on people on Facebook saying you can’t lose and they think the most ridiculously so in the regulated arena you would go to prison for doing what they do, which is, they say, cryptocurrency Y has gone from this to this, which is up 10,000. If you’ve done this, you’d be a millionaire. That is totally illegal to do, whether if you’re broke in biotech or mining or normal equities and it drives me nuts that that’s not illegal. These people should go to prison because it’s so irresponsible. And any volatile asset. The other fallacious thing about that is, if you say, oh, bitcoin’s gone from $100 to $60,000, that does not mean that everybody who owns it has made that return, because a hell of a lot of them bought it for $19,000 in December 2017, when they got super excited and it was on the press every day, and then we’re down to $3,000. To the extent, the more volatile an asset class is, the more likely it is you’ll cock it up and, because human emotion has a really really strong part to play, and you’ll go oh, everybody’s buying, everybody’s selling. It’s just happened again in the last two weeks. Elon Musk wakes up one morning and tweets whatever. Then the Chinese do whatever, I don’t want to own something or expose my capital to something when there’s that risk, even if it might end up being worth a million dollars.
Dr James:
There’s nothing that you said that I would disagree with, nothing that you said that I would disagree with. I think that’s totally reasonable. And with investing that’s the interesting thing about it there’s no one shoe that fits and that comes into trading as well. There’s horses for courses, there’s different styles and people chase the gains in verticommas. But what works for you might not work for someone else. That’s the long and the short of it.
Andrew:
So know yourself. There’s a great book called although I forgot what it’s called but Dr Van Thaub, about trading.
Dr James:
Okay, van Thaub, trade your way to financial freedom here we go Over here, yeah.
Andrew:
And the first chapter. He says the most important factor in your success is you Like. You have to know yourself, you have to know your risk tolerance system. But, if I may, the other thing. The other point I wanted to make with apologies for interrupting you, though, because I think it’s really important is one of the great life lessons I think we should all learn and I’m still learning it at 45, is how you deploy your time is super, super important. Right, the 80-20 rule you get 80% of your results from 20% of your actions. So focus on the 20% of your actions. That actually matters right Now. One of the other problems to me with crypto is it’s incredibly time-consuming to do it well and to do it properly, and I don’t have the time right At my time. Every hour of my time that I spend working on playing with finance, doing a call like this, writing a piece, a thought piece about the SGT, whatever, is to me, a far better use of my time than an hour spent looking at screens trying to work out what Bitcoin or Ether might do next week. Truly and I think that’s very, very firmly true for somebody in their 20s who should frankly be working to become better at whatever their main job is, and the ROI on that activity will be far higher on a risk-adjusted basis than the ROI on messing about in crypto groups going. What’s it doing today? Is it up, Is it down? Hodl, what a waste of time. The counter-argument is if you’ve got 5% of your net worth, you have somebody who’s got a good handle on what is Cardano, what is Ether, what are the merits of these respects, and they’re like it’s a very good thing and says, okay, so own 10 of them and then just leave them for 20 years because that could really materially impact your net worth. Yeah, that is probably a sensible thing to do, but I’d rather do that with biotech names. I really would, because they might cure cancer. I’ve got a couple of companies I think are literally worth 100 times what they’re currently trading at. That I’m about to put in my pension, and that’s because they might cure cancer. I think that, to me, is a much more compelling investment thesis than really uncertain new categories classic cost, that’s unregulated and they can get winged around by Chinese people in Wanzhou. You know, because they’ve. I mean, you know anyway, I’m ranting and I’ll shut up and let you say your piece where the apology is.
Dr James:
Real quick guys. I’ve put together a special report for Dentist entitled the seven costly and potentially disastrous mistakes that dentists make whenever it comes to their finances. Most of the time, dentists are going through these issues and they don’t even necessarily realize that they’re happening until they have their eyes opened, and that is the purpose of this report. You can go ahead and receive your free report by heading on over to wwwdentistooninvestcom. Forward slash podcast report or, alternatively, you can download it using the link in the description. This report details these seven most common issues. However, most importantly, it also shows you how to fix them Really. Looking forward to hearing your thoughts. No, it’s great. No, I love to hear your opinion on it. And, like I say you haven’t, you haven’t said anything that I wouldn’t necessarily disagree with. When people get into the space, I don’t think they realize just how much time it takes to water the garden and plant the plants and maintain your portfolio, and whilst there are a lot of hacks to make yourself more time efficient doing that, there’s an absolute ton of those things that I learned through time that made me way more efficient. I would say you still have to keep an eye on it every day. As for actively trading it. For me personally, sometimes I go a whole weeks and I don’t move anything around and then sometimes there’s volatility, there’s a flurry of activity. What I do is I make it a lot more efficient by setting trade alerts on my phone and on trading viewing so I know if it hits certain prices. I don’t have to be in front of the computer. But absolutely that is not for everyone, and if someone is not prepared to do that, then my argument would be that you shouldn’t really be buying many of the altcoins, so many of the alternatives to Bitcoin and Ethereum, because really we talked about pump and dumps and manipulation a second earlier. 99% of those are pumps and dumps Okay, 99%. And, by the way, this is coming from someone who loves crypto. Okay, this is that. This is coming from someone who loves it. Yeah, 99% are pumps and dumps. However, one of the best ways to invest in crypto although maybe you might not agree with it on an ethical basis, is to be able to suss which of those charts and which of those cryptos are pumps and dumps by assessing the chart. Okay, and once you can do that, you can be on the right side of the smart money rather than the person who’s still buying Dogecoin or Shiba Inu at the prices that it currently is, because, come on, if you look at that, that is so clearly a pump and dump. You know what I mean. And there are people who bought that thing when it was really cheap and they’re selling to people like you so that they can make money. So absolutely anybody who is actively buying Dogecoin or Shiba Inu at these prices. I would encourage you to think twice about that. It is never something that I would buy the way it looks. At the minute we talk about market cycles, those are towards the end of their market cycle and as well as that, we mentioned something earlier. Maybe you I’m sure you’re aware of this. Well, you did. You did mention it. Actually, it is possible to passively invest in the crypto space, but there’s only, there’s only two cryptos that I would do that with, and you might even argue there’s. Maybe some would argue there’s three. Okay, those cryptos are Bitcoin and either and Binance coin, because as long as there’s Binance, there will probably be Binance coin. But the third one I’ve said, maybe not everybody would agree with that. Not even everybody would agree that Ethereum is a good long-term hold, but the majority of the consensus in in the space would say that Bitcoin is your only buy and hold, because whilst the space has value, bitcoin will have value. That’s the philosophy that a lot of people hold but I’ll make a comment about it.
Andrew:
So I was right. The car was a stockbroker with Swiss Bank in 99, 2000, when the dot-com boom was going on. Right, and Nokia. I believe that Nokia peaked at about 200 billion euros of market cap and it was that. It literally was 80% of the finished stock market. Right, everyone owned a Nokia phone. When you mentioned a Nokia phone, everyone owned a Nokia phone. Right, and everyone thought Nokia. Nokia is the big dog. You know, big dog, 800 pound, gorilla bell whether that is good has won the mobile phone battle. It’s worth 200 billion euros. It’s gonna be a trillion dollar company. They’re always crazy price on and the idea that Nokia as the most powerful, strong mobile phone incumbent globally would end up, I mean, I don’t know what it’s worth right now, but maybe it’s nothing.
Dr James:
Is it compared to?
Andrew:
it had a mobile infrastructure business and last summer looked at it was worth about four billion euros. So it was just making mobile towers for Apple and and Samsung to run there. You know, and I look, I’ve read a lot about Bitcoin. I’ve read a lot about the fact that you know the way it works. It’s so intractable the proof of concept of distribution that all that good stuff is why it is the big bell with a blue chip. That could you know. You have longevity and stuff. But I heard all the same arguments about Nokia that it was just unimpeachable, never gonna. Apple come it’s. It’s very rarely the first big dog that comes along in a new sector, whether that’s mobile phones in 98, 99 or crypto today that ends up 20 years later being still the one you know do you want to hear the spaces argument against that?
Dr James:
the spaces? The spaces argument would be that Bitcoin and Ethereum are effectively ETFs of the space. Okay, so it’s the equivalent of buying maybe the S&P 500 or the Fitzy or something like that, because it’s an index of all the cryptos. But again, you and I can say whatever, I can say all I like and you can say all I like. Basically no one knows. Okay, basically no one knows.
Andrew:
That is the point yeah, and look, I don’t know that, the biotech companies I mentioned earlier. I could kill cancer and go up on the next right, I mean or 10 or whatever but but I have a much better probability of getting that right as somebody’s to spend six and a half years working biotech than I do about getting crypto right now. Totally, and I think but to my extension, I think that most people, whether they’re 25, 30, 35, 40, whatever you are gainfully employed in a job that’s quite demanding and takes their time, I’ve got a better. If they deploy that their hours of time into that job and career progression, the likely ROI for them personally in their life is higher than deploying that time into learning about what, trying to figure out what Bitcoin and crypto and the ether will do. That’s my genuine view for most people. And the other thing is, particularly when I see, I see team, you know one of the ladies who works with us, a paying the funds, her son’s 13 and he and he asked if he could invest in Bitcoin the other day. He doesn’t know what an Icer is. Now that and now that is great to me. That is really worrying right, and that is that’s really prevalent right now. Is that kids on tiktok, you know millennials, people at uni, whatever the because the other thing is any speculative, incredibly volatile asset like if you’ve only got 5,000 quid of savings, there’s no way you should be anywhere near it. But you like wait until you’re 14, you’ve got 100,000. You know, I mean, and I know that, I know you were an early adopter and I know that a lot of people, you know there are lots of people in the crypto space who did gain and have made hundreds of times their money. So they maybe put five grand in another 200 grand or whatever, and that’s that’s great. But you know that 200 grand, I mean it may a mines worth well over a minute has over a million in PCC and ether and you know, two weeks ago now it’s 600 grand, what like and what happened, and fill us sort of psychologically. I would hate to have to think well, I’ve got them down 400 grand in the last three weeks. Now is it gonna go? Am I gonna be down another 400 grand in the month ahead or I’m gonna be back up for a round? I don’t know and I don’t want my wealth. I don’t want to have to sit there on a Sunday morning reading emails and looking at charts going geez, is it gonna do that? Is it gonna do that? I’ve got no interest that because I don’t need to. I really really don’t need to. It to what, ultimately? What is the point of all this investment stuff? Right it, as I said right at the beginning of the call, it is to get to a point in your life where you can live on your capital, not on your income. I mean then, if you like, to my point about my at 90 year old stock broker friend. Lots people don’t want to do is look. People who love their job might want to carry on earning income, but it’s only to just to use financial products to help you become wealthy and have an easier life and be able to afford things you like and look after your kids and depend on whatever else in that endeavor. There are loads and loads and loads and loads of really good quality regulated assets with which I can achieve that, and whereas I just think crypto is, you know it could go to zero. I mean, if I know it’s distributed and you can’t, but if you can’t distribute the person, if it is as illegal to go through the throw with a USB stick with CREPTON as it is to go through with three grams of cocaine in your pocket. That’s not going to be very good for the price of Bitcoin Right or any other. You know, if an American central bank’s the world over the three countries that have tried to replace the US dollar with gold in the last 20 years, do you know what they are?
Dr James:
No, I’d love to hear though.
Andrew:
Iraq, iran and Libya Okay, the three countries whose you know political leadership is mad enough to try and take on the American. You know what’s called the Pax dollar and basically American hedge around the dollar global currency system. If Americans are disproportionately wealthy because everybody used the dollar, it enables them to do stuff that nobody else can do and take more than their fair share of the world’s economic output. Right? What happens to those three countries? Because they say, well, screw you, america, we’re going to trade our world in a gold backed Deena. Now, how quickly did the tanks roll in, right?
Dr James:
Now Bitcoin that’s crazy. I didn’t know that. I had no idea.
Andrew:
I don’t think a lot when most crypto users don’t, with our audience being asked about it. Right, you know I get. There are plenty of counter-economics to what I’m saying. It’s really interesting, you know, it’s a wonderful technology. Like to get rid of an intermediary and have proof embedded into the, into the blockchain, all that good stuff. But and it’s distributing stuff, but the end of the day, if it starts to threaten America’s ability to protect power globally. Now there’s a great I forget the name. There’s a really good Bitcoin commentator. It’s like a Turkish name, he’s a British guy. He’s based in America. He’s quite prolific. No doubt It’ll come up Ron Paul, somebody Paul or not Ron Paul, but anyway it might come back to me. He made a really good point, which is to counter-argument my argument. So, okay, fine, but Bitcoin could easily be half a million dollars before it’s banned. And actually in the last two years he’s been right, you know, it’s come from 3000 to 60,000. So you know my argument, my argument that maybe one day America wakes up and makes it illegal to carry to use crypto, all in pain of seven years in prison. Right, and so did the EU, and so did China, and so did Japan. And then, well, what happens then. That argument has been valid for several years and in that time the price has gone from $3,000 to $60,000 and obviously now back down to 37,000 or whatever it is, but that’s a very, very dangerous game of Russian roulette to me with my hard-earned capital Like. Anyway, the overall conclusions go back to your original question is I would certainly consider it for a small amount of my net worth at some point when my net worth is bigger, you know, and my net worth at the moment, the speculative, aggressive bit of my net worth at the moment, is all going to be going into biotech. Because I know these companies inside out. I think I have a pretty good handle on that space. I think companies that are going to cure cancer or dementia or have robots replace nurses in elderly patient care, and there’s so much incredible stuff happening in biotech. I think that is fundamentally more valuable than an untested, untried new type of investment that the government sort of well might make illegal in the previous time.
Dr James:
Yeah, I won’t disagree with anything that you said. I won’t. I think we can both agree, andrew, that perhaps the number of people who get into crypto don’t fully realise what they’re getting into and maybe it would be helpful if they had more of an understanding of what that entails and also a better understanding of their circumstances, conventional financial instruments and how that reflects in their investing not only generally but also in the crypto space. Does that sound reasonable?
Andrew:
That is absolutely, and you know, and there are good guys. I mean, the trouble is in an unregulated space where anybody can say anything they want, there are lots of bad actors, right, and it’s hard to disagree with the good actors, but you know that’s your battle to fight and I wish you the very best. One other thing I wanted to say, though, before we move off the topic, because I ranted about it and I didn’t mean to come across this, but you know it is fascinating. The other thing I was going to say to you is some of the very smartest and most successful people I know, including my best man you know who was my best man, one of my wife when I got married who has a very, very high profile job and is a super big marketer, you know, are huge bulls of crypto. I think they think I’m an idiot and then, frankly, they are smarter than me and it was like but it comes back to the opportunity cost argument for me personally, it’s like, you know, for me personally, I have very clear plan about what I want to achieve and what I need and what I can use, which vehicles I can use. To that. I don’t need crypto, but you know, I just want to say that some of my very smartest friends have really junk the Kool-Aid and see the vision and think it’s going to be totally transformational for the world and all that stuff. So you know I’m probably full of nonsense.
Dr James:
But that’s the part I love about investing is there is no one shoe that fits. And to pull you back to Van Tharp’s book as well we were just talking about it. There’s a lot of things. If anybody is trading and hasn’t read that book, please read that book. I’m going to hold it up to the screen now For anybody who’s listening to the audio version of this. It’s called Trade your Way to Financial Freedom and by a man called Kevan Tharp, and I quoted a lot. I quoted a lot in my trading. It’s not the only trading book I’ve ever read, but it’s definitely probably the best.
Andrew:
It’s one of the real, it’s like one of the foundational texts of you know, if you want to spend time on trading, you definitely need to read that book.
Dr James:
It’s seminal, honestly, and the way the guy the guy makes so many interesting points in it. He makes the point that trading is 100% psychology. Okay, because if you don’t have your psychology down, it doesn’t matter what system you use, you’ll never be able to trade it effectively. And it’s other point that he makes that really sticks with me is that there is no, there is no holy grail in investing. This is the exact quote there is no holy grail in investing. There is just your holy grail and you need to find what that is. I love that.
Andrew:
By the way, have you read Way of the Turtle as well?
Dr James:
I haven’t, but it’s on my to read list. I recently read well, not so recently, maybe about four or five months ago psychology of money.
Andrew:
Yeah, so I was on a call with him three Wednesday. Morgan Housel yeah, so I. It was this Irish. I was doing an interview for a big Irish investment thing and the two guest speakers were me and Morgan Housel and I was like bloody hell, yeah, he sold. I think that book sold 300,000 copies. Now, In fact, at two o’clock this afternoon, I’ve got a call with his publisher Exciting Wow To talk about my next book. So with that, with the same publishing house, don’t tell my current publisher that yes.
Dr James:
I don’t think anyone will listen to this podcast, so we should be okay.
Andrew:
I’m a shopping but it’s an exploratory school. But no, that I have also. That is. You’re exactly right, it’s that point about how important you are and your, you know your, your ideas about money. But I mean, then again, that is a malleable thing, like one of the one of the biggest problems is people have all these totally incorrect beliefs about money. The stock market is a casino. Wrong. Cash is king. Wrong. Property can only ever go up and paying some paying rent, it’s paying somebody else’s mortgage, wrong. I mean like if you have grown up with all these beliefs that are just totally simplistic, that you know parents pass on to their kids and their parents are not financially literate like they do this, do that, and they’re just fundamentally unhelpful, wrong things, then one of the most important things to do in order to succeed in investment is to change those incorrect things by educating yourself. And you know I flatten myself saying hopefully my book doesn’t element that.
Dr James:
Educate yourself, everyone. The books are out there, the knowledge is out there. If anybody needs some recommendations on books, you know where I am on Facebook, andrew. We’re coming towards the end of this podcast and I wanted to ask if there’s. There will naturally be some people listening to this who have yet to begin their investment journey. Do you have any words of encouragement that you’d like to offer them to begin?
Andrew:
Absolutely, I think, the most important thing. So we needed to early like my idea of ignoring the news. Every week, almost without fail, I’ll get at least one email from somebody saying I’ve read your book. I really loved your book. Thanks so much for it. I’ve been thinking about investing and my wife and I just wanted to get in touch because we’re wondering whether or not now is the right time to start investing. Because of Brexit, trump, syria, libya, coronavirus, boris Johnson, there’s always a reason to be scared of investment and to not invest. My answer to them and I’ve written this up in some of my opinion pieces the right time to invest is always now, every month, for the rest of your life, as long as you’ve learned enough about how to do that in a sensible way. What are the main things? Waiting until some time when there won’t be Brexit or there won’t be coronavirus or there won’t be? There is never a time like that because, as I said earlier, the press spend 99% of their life, of their time focusing on the 0.001% of bad things that are happening in the world. We all have this completely fear-based, incorrect understanding of investment. My enemy. Starting out their investment journey should sort out an ISA should pay at least 10% of whatever they can save, whatever they earn each month, into a sensible mix of investments. I’d like to think that that’s the theory and that’s the practice. Just to repeat, if I may do a bit of a plug.
Dr James:
I actually wanted to ask you about your new book. I can see you holding up to the screen For anybody who’s listening. Would you be able to tell us the title and a little bit more about?
Andrew:
it. It’s called Live Unless Invest. The Rest we call it a workbook. I actually had to pay a lawyer a lot of money to sign off on that book before we published it, because it’s quite prescriptive and it talks about our funds, for example. You’ve got to be very careful about what you can and can’t say. You have an investment fund and it all has to be disclaimed. Hopefully, I think anybody who reads it will see that it’s quite fair about the merits of our fund. In fact, it’s only appropriate for certain amounts of your money and certain people and stuff. Basically, it’s that 100-year-old age idea. It’s really the nuts and bolts of how to implement a sensible, big picture, long-term approach to investment. It’s investing, it’s not trading. I want to say our Facebook group is a fiver a month. You can join through our website and everybody who joins the Facebook group gets that for free in audio, in audiobook and ebook versions. You can join the thing, pay a fiver, get it for free and then leave if you want to, if you don’t like it, or it’s available on Amazon along with the other ones. I find it myself to think that if you get through both of the books, you should be like 80% to 90% of the way to being able to confidently or maybe even more being able to, sap an ICER and think about your pension and just get stuff stored in a really prudent, long-run, boring tortous approach to investment.
Dr James:
Thank you so much, andrew. Thanks as well for being so generous with your time, because we’ve been on this call about two and a half hours. What I was going to propose, I was going to propose that we split this into two podcasts, actually, because I think two hours is asking quite a lot of anybody to sit through our rambling. That might be quite nice. What I will do everyone. You’ll be listening to the second part of the podcast. This will be the conclusion that you’re listening to now, because this will, of course, be the second bit. Andrew has been very generous with his time today. I’m so grateful that he’s managed to squeeze us into his day, because I’m sure he’s an incredibly busy person. What was your fund? What was replying to people on Facebook? All of those things. Thank you so so much, andrew. If anybody who is listening to this is not on my Facebook group the Facebook group that spawned this podcast feel free to search it on Facebook. It’s for dentists who are wanting to raise their financial literacy and gain a practical knowledge about how they might invest sensibly emphasis on sensibly so that they can build a long-term money pot and retire and live financial freedom and all of those things that we’ve taught that we’re conventionally told that may be out of our reach. They’re totally within our reach and that is possible to do. You just need to write and honestly do it. The Facebook group’s name is Dentist who Invest Community Group for Dentist who Enjoy Trading, and I look forward to seeing you on there if you find this podcast of interest today, andrew, thank you so much once again and thank you for coming on the show.
Andrew:
You’ve really enjoyed it. Speak to you soon.
Dr James:
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